The following is an excerpt of E-rate related news recently
published by The Atlanta Journal-Constitution. If you have already
subscribed to The Atlanta Journal-Constitution, you may access the full
article http://www.ajc.com/metro/content/metro/0704/11erate.html.
If you are not currently a member, you will be directed to fill out a short
registration form in order to view the article. Registration is free.

By Ken Foskett
The Atlanta Journal-Constitution
Published on: 07/10/04

E-rate deal squanders $19 million

Over the summer of 1999, nearly 200 Georgia schools received some of the
hottest high-tech gear on the market, thanks to the national E-rate program.

Each school was given equipment intended to capture video from passing
satellites and route the pictures to classroom computers. Teachers might easily
display images of African lions circling their prey or South American rain
forests a continent away.

A little-known state agency spent about $19 million trying to make the project
work. It never did.

State officials awarded the lucrative contract to a company composed of two
salesmen, a businessman and a lawyer — not one of whom had the engineering
expertise necessary for such a technically sophisticated project.

The company's marketing strategy was to sell the project to the schools that
could obtain the fattest government subsidies — some of the poorest schools in
Georgia.

Company executives paid themselves six-figure salaries and about $900,000 in
bonuses before two of the principals negotiated $1 million buyouts less than a
year into the venture.

Some schools later cannibalized the equipment they received for other uses, but
now most of it sits boxed in district warehouses or is pushed to the side in
school storage closets, slipping steadily toward obsolescence.

Today, the failed project survives as a testament to the greed, waste and
mismanagement that have put E-rate in the cross hairs of a congressional
inquiry. The $2.25 billion-a-year program, launched in 1998 to help poor school
districts get Internet access and funded by telephone users everywhere, is the
subject of more than 40 criminal investigations nationwide.

Atlanta's Metropolitan Regional Educational Service Agency, or MRESA, a state
agency devoted primarily to teacher training, was among the first educational
consortiums to take advantage of E-rate. Now, the agency's video-on-demand
project ranks as one of E-rate's most colossal failures. "This ranks up there
right at the top," said Mel Blackwell, spokesman for E-rate in Washington.

The debacle began with the unchallenged claims of the video system's viability
and ended with an FBI inquiry, three federal audits and corporate bankruptcies.